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Agile organizations—of any size and across industries—have five key elements in common.

Our experience and research demonstrate that successful agile organizations consistently exhibit the five trademarks described in this article. The trademarks include a network of teams within a people-centered culture that operates in rapid learning and fast decision cycles which are enabled by technology, and a common purpose that co-creates value for all stakeholders. These trademarks complement the findings from “How to create an agile organization.”

The old paradigm: Organizations as machines

A view of the world—a paradigm—will endure until it cannot explain new evidence. The paradigm must then shift to include that new information. We are now seeing a paradigm shift in the ways that organizations balance stability and dynamism.

Sidebar

What is an agile organization?

The dominant “traditional” organization (designed primarily for stability) is a static, siloed, structural hierarchy – goals and decisions rights flow down the hierarchy, with the most powerful governance bodies at the top (i.e., the top team). It operates through linear planning and control in order to capture value for shareholders. The skeletal structure is strong, but often rigid and slow moving.

In contrast, an agile organization (designed for both stability and dynamism) is a network of teams within a people-centered culture that operates in rapid learning and fast decision cycles which are enabled by technology, and that is guided by a powerful common purpose to co-create value for all stakeholders. Such an agile operating model has the ability to quickly and efficiently reconfigure strategy, structure, processes, people, and technology toward value-creating and value-protecting opportunities. An agile organization thus adds velocity and adaptability to stability, creating a critical source of competitive advantage in volatile, uncertain, complex, and ambiguous (VUCA) conditions.

First, the old paradigm. In 1910, the Ford Motor Company was one of many small automobile manufacturers. A decade later, Ford had 60 percent market share of the new automobile market worldwide. Ford reduced assembly time per vehicle from 12 hours to 90 minutes, and the price from $850 to $300, while also paying employees competitive rates.1

Ford’s ideas, and those of his contemporary, Frederick Taylor, issued from scientific management, a breakthrough insight that optimized labor productivity using the scientific method; it opened an era of unprecedented effectiveness and efficiency. Taylor’s ideas prefigured modern quality control, total-quality management, and—through Taylor’s student Henry Gantt—project management.

Gareth Morgan describes Taylorist organizations such as Ford as hierarchical and specialized—depicting them as machines.2 For decades, organizations that embraced this machine model and the principles of scientific management dominated their markets, outperformed other organizations, and drew the best talent. From Taylor on, 1911 to 2011 was “the management century.”

Disruptive trends challenging the old paradigm

Now, we find the machine paradigm shifting in the face of the organizational challenges brought by the “digital revolution” that is transforming industries, economies, and societies. This is expressed in four current trends:

Constant introduction of disruptive technology. Established businesses and industries are being commoditized or replaced through digitization, bioscience advancements, the innovative use of new models, and automation. Examples include developments such as machine learning, the Internet of Things, and robotics.

Accelerating digitization and democratization of information. The increased volume, transparency, and distribution of information require organizations to rapidly engage in multidirectional communication and complex collaboration with customers, partners, and colleagues.

The new war for talent. As creative knowledge- and learning-based tasks become more important, organizations need a distinctive value proposition to acquire—and retain—the best talent, which is often more diverse. These “learning workers” often have more diverse origins, thoughts, composition, and experience and may have different desires (for example, millennials).

When machine organizations have tried to engage with the new environment, it has not worked out well for many. A very small number of companies have thrived over time; fewer than 10 percent of the non-financial S&P 500 companies in 1983 remained in the S&P 500 in 2013. From what we have observed, machine organizations also experience constant internal churn. According to our research with 1,900 executives, they are adapting their strategy (and their organizational structure) with greater frequency than in the past. Eighty-two percent of them went through a redesign in the last three years. However, most of these redesign efforts fail—only 23 percent were implemented successfully.3

The new paradigm: Organizations as living organisms

The trends described above are dramatically changing how organizations and employees work. What, then, will be the dominant organizational paradigm for the next 100 years? How will companies balance stability and dynamism? Moreover, which companies will dominate their market and attract the best talent?

Our article “Agility: It rhymes with stability” describes the paradigm that achieves this balance and the paradox that truly agile organizations master—they are both stable and dynamic at the same time. They design stable backbone elements that evolve slowly and support dynamic capabilities that can adapt quickly to new challenges and opportunities. A smartphone serves as a helpful analogy; the physical device acts as a stable platform for myriad dynamic applications, providing each user with a unique and useful tool. Finally, agile organizations mobilize quickly, are nimble, empowered to act, and make it easy to act. In short, they respond like a living organism (Exhibit 1).

Exhibit 1

When pressure is applied, the agile organization reacts by being more than just robust; performance actually improves as more pressure is exerted.4 Research shows that agile organizations have a 70 percent chance of being in the top quartile of organizational health, the best indicator of long-term performance.5 Moreover, such companies simultaneously achieve greater customer centricity, faster time to market, higher revenue growth, lower costs, and a more engaged workforce:

A global electronics enterprise delivered $250 million in EBITDA, and 20 percent share price increase over three years by adopting an agile operating model with its education-to-employment teams.

A global bank reduced its cost base by about 30 percent while significantly improving employee engagement, customer satisfaction, and time to market.

A basic-materials company fostered continuous improvement among manual workers, leading to a 25 percent increase in effectiveness and a 60 percent decrease in injuries.

As a result agility, while still in its early days, is catching fire. This was confirmed in a recent McKinsey Quarterly survey report of 2,500 business leaders.6 According to the results, few companies have achieved organization-wide agility but many have already started pursuing it in performance units. For instance, nearly one-quarter of performance units are agile. The remaining performance units in companies lack dynamism, stability, or both.

However, while less than ten percent of respondents have completed an agility transformation at the company or performance-unit level, most companies have much higher aspirations for the future. Three-quarters of respondents say organizational agility is a top or top-three priority, and nearly 40 percent are currently conducting an organizational-agility transformation. High tech, telecom, financial services, and media and entertainment appear to be leading the pack with the greatest number of organizations undertaking agility transformations. More than half of the respondents who have not begun agile transformations say they have plans in the works to begin one. Finally, respondents in all sectors believe that more of their employees should undertake agile ways of working (on average, respondents believe 68 percent of their companies’ employees should be working in agile ways, compared with the 44 percent of employees who currently do).

The rest of this article describes the five fundamental “trademarks” of agile organizations based on our recent experience and research. Companies that aspire to build an agile organization can set their sights on these trademarks as concrete markers of their progress. For each trademark, we have also identified an emerging set of “agility practices”—the practical actions we have observed organizations taking on their path to agility (Exhibit 2).

Exhibit 2

The five trademarks of agile organizations

While each trademark has intrinsic value, our experience and research show that true agility comes only when all five are in place and working together. They describe the organic system that enables organizational agility.

Linking across them, we find a set of fundamental shifts in the mind-sets of the people in these organizations. Make these shifts and, we believe, any organization can implement these trademarks in all or part of its operations, as appropriate.

1. North Star embodied across the organization

Mind-set shift

From:“In an environment of scarcity, we succeed by capturing value from competitors, customers, and suppliers for our shareholders.”

To:“Recognizing the abundance of opportunities and resources available to us, we succeed by co-creating value with and for all of our stakeholders.”

Agile organizations reimagine both whom they create value for, and how they do so. They are intensely customer-focused, and seek to meet diverse needs across the entire customer life cycle. Further, they are committed to creating value with and for a wide range of stakeholders (for example, employees, investors, partners, and communities).

To meet the continually evolving needs of all their stakeholders, agile organizations design distributed, flexible approaches to creating value, frequently integrating external partners directly into the value creation system. Examples emerge across many industries, including: modular products and solutions in manufacturing; agile supply chains in distribution; distributed energy grids in power; and platform businesses like Uber, Airbnb, and Upwork. These modular, innovative business models enable both stability and unprecedented variety and customization.

To give coherence and focus to their distributed value creation models, agile organizations set a shared purpose and vision—the “North Star”—for the organization that helps people feel personally and emotionally invested. This North Star serves as a reference when customers choose where to buy, employees decide where to work, and partners decide where to engage. Companies like Amazon, Gore, Patagonia, and Virgin put stakeholder focus at the heart of their North Star and, in turn, at the heart of the way they create value.

Agile organizations that combine a deeply embedded North Star with a flexible, distributed approach to value creation can rapidly sense and seize opportunities. People across the organization individually and proactively watch for changes in customer preferences and the external environment and act upon them. They seek stakeholder feedback and input in a range of ways (for example, product reviews, crowd sourcing, and hackathons). They use tools like customer journey maps to identify new opportunities to serve customers better, and gather customer insights through both formal and informal mechanisms (for example, online forums, in-person events, and start-up incubators) that help shape, pilot, launch, and iterate on new initiatives and business models.

These companies can also allocate resources flexibly and swiftly to where they are needed most. Companies like Google, Haier, Tesla, and Whole Foods constantly scan the environment. They regularly evaluate the progress of initiatives and decide whether to ramp them up or shut them down, using standardized, fast resource-allocation processes to shift people, technology, and capital rapidly between initiatives, out of slowing businesses, and into areas of growth. These processes resemble venture capitalist models that use clear metrics to allocate resources to initiatives for specified periods and are subject to regular review.

Senior leaders of agile organizations play an integrating role across these distributed systems, bringing coherence and providing clear, actionable, strategic guidance around priorities and the outcomes expected at the system and team levels. They also ensure everyone is focused on delivering tangible value to customers and all other stakeholders by providing frequent feedback and coaching that enables people to work autonomously toward team outcomes.

2. Network of empowered teams

Mind-set shift

From:“People need to be directed and managed, otherwise they won’t know what to do—and they’ll just look out for themselves. There will be chaos.”

To:“When given clear responsibility and authority, people will be highly engaged, will take care of each other, will figure out ingenious solutions, and will deliver exceptional results.”

Agile organizations maintain a stable top-level structure, but replace much of the remaining traditional hierarchy with a flexible, scalable network of teams. Networks are a natural way to organize efforts because they balance individual freedom with collective coordination. To build agile organizations, leaders need to understand human networks (business and social), how to design and build them, how to collaborate across them, and how to nurture and sustain them.

An agile organization comprises a dense network of empowered teams that operate with high standards of alignment, accountability, expertise, transparency, and collaboration. The company must also have a stable ecosystem in place to ensure that these teams are able to operate effectively. Agile organizations like Gore, ING, and Spotify focus on several elements:

Implement clear, flat structures that reflect and support the way in which the organization creates value. For example, teams can be clustered into focused performance groups (for example, “tribes,” or a “lattice”) that share a common mission. These groups vary in size, typically with a maximum of 150 people. This number reflects both practical experience and Dunbar’s research on the number of people with whom one can maintain personal relationships and effectively collaborate.7 The number of teams within each group can be adapted or scaled to meet changing needs.

Ensure clear, accountable roles so that people can interact across the organization and focus on getting work done, rather than lose time and energy because of unclear or duplicated roles, or the need to wait for manager approvals. Here, people proactively and immediately address any lack of clarity about roles with one another, and treat roles and people as separate entities; in other words, roles can be shared and people can have multiple roles.

Foster hands-on governance where cross-team performance management and decision rights are pushed to the edge of boundaries.8 It is at this interaction point that decisions are made as close to relevant teams as possible, in highly-productive, limited-membership coordinating forums. This frees senior leaders to focus on overall system design and provide guidance and support to responsible, empowered teams that focus on day-to-day activities.

Evolve functions to become robust communities of knowledge and practice as professional “homes” for people, with responsibilities for attracting and developing talent, sharing knowledge and experience, and providing stability and continuity over time as people rotate between different operating teams.

Create active partnerships and an ecosystem that extends internal networks and creates meaningful relationships with an extensive external network so the organization can access the best talent and ideas, generate insights, and co-develop new products, services, and/or solutions. In agile organizations, people work hands-on and day-to-day with customers, vendors, academics, government entities, and other partners in existing and complementary industries to co-develop new products, services, and/or solutions and bring them to market.

Design and create open physical and virtual environments that empower people to do their jobs most effectively in the environment that is most conducive to them. These environments offer opportunities to foster transparency, communication, collaboration, and serendipitous encounters between teams and units across the organization.

Like the cells in an organism, the basic building blocks of agile organizations are small fit-for-purpose performance cells. Compared with machine models, these performance cells typically have greater autonomy and accountability, are more multidisciplinary, are more quickly assembled (and dissolved), and are more clearly focused on specific value-creating activities and performance outcomes. They can be comprised of groups of individuals working on a shared task (i.e., teams) or networks of individuals working separately, but in a coordinated way. Identifying what type of performance cells to create is like building with Lego blocks. The various types (Exhibit 3) can be combined to create multiple tailored approaches.

Exhibit 3

The three most commonly observed agile types of performance cell today include:

Cross-functional teams deliver ‘products’ or projects, which ensure that the knowledge and skills to deliver desired outcomes reside within the team.These teams typically include a product or project owner to define the vision and prioritize work.

Self-managing teams deliver baseload activity and are relatively stable over time. The teams define the best way to reach goals, prioritize activities, and focus their effort. Different team members will lead the group based on their competence rather than on their position.

Flow-to-the-work pools of individuals are staffed to different tasks full-time based on the priority of the need. This work method can enhance efficiencies, enable people to build broader skillsets, and ensure that business priorities are adequately resourced.

However, other models are continuously emerging through experimentation and adaptation.

3. Rapid decision and learning cycles

Mind-set shift

From: “To deliver the right outcome, the most senior and experienced individuals must define where we’re going, the detailed plans needed to get there, and how to minimize risk along the way.”

To: “We live in a constantly evolving environment and cannot know exactly what the future holds. The best way to minimize risk and succeed is to embrace uncertainty and be the quickest and most productive in trying new things.”

Agile organizations work in rapid cycles of thinking and doing that are closely aligned to their process of creativity and accomplishment. Whether it deploys these as design thinking, lean operations, agile development, or other forms, this integration and continual rapid iteration of thinking, doing, and learning forms the organization’s ability to innovate and operate in an agile way.

This rapid-cycle way of working can affect every level. At the team level, agile organizations radically rethink the working model, moving away from “waterfall” and “stage gate” project-management approaches. At the enterprise level, they use the rapid-cycle model to accelerate strategic thinking and execution. For example, rather than traditional annual planning, budgeting, and review, some organizations are moving to quarterly cycles, dynamic management systems like Objectives and Key Results (OKRs), and rolling 12-month budgets.

The impact of this operational model can be significant. For example, a global bank closed its project-management office and shifted its product-management organization from a traditional waterfall approach to a minimal viable product-based process. It moved from four major release cycles a year to several thousand-product changes monthly; it simultaneously increased product development, deployment, and maintenance productivity by more than 30 percent.

There are several characteristics of the rapid cycle model:

Agile organizations focus on rapid iteration and experimentation. Teams produce a single primary deliverable (that is, a minimal viable product or deliverable) very quickly, often in one- or two-week “sprints.” During these short activity bursts, the team holds frequent, often daily, check-ins to share progress, solve problems, and ensure alignment. Between sprints, team members meet to review and plan, to discuss progress to date, and to set the goal for the next sprint. To accomplish this, team members must be accountable for the end-to-end outcome of their work. They are empowered to seek direct stakeholder input to ensure the product serves all the needs of a group of customers and to manage all the steps in an operational process. Following this structured approach to innovation saves time, reduces rework, creates opportunities for creative “leapfrog” solutions, and increases the sense of ownership, accountability, and accomplishment within the team.

Agile organizations leverage standardized ways of working to facilitate interaction and communication between teams, including the use of common language, processes, meeting formats, social-networking or digital technologies, and dedicated, in-person time, where teams work together for all or part of each week in the sprint. For example, under General Stanley McChrystal, the US military deployed a series of standardized ways of working between teams including joint leadership calls, daily all-hands briefings, collective online databases, and short-term deployments and co-location of people from different units. This approach enables rapid iteration, input, and creativity in a way that fragmented and segmented working does not.

Agile organizations are performance-oriented by nature. They explore new performance- and consequence-management approaches based on shared goals across the end-to-end work of a specific process or service, and measure business impact rather than activity. These processes are informed by performance dialogues comprised of very frequent formal and informal feedback and open discussions of performance against the target.

Working in rapid cycles requires that agile organizations insist on full transparency of information, so that every team can quickly and easily access the information they need and share information with others. For example, people across the unit can access unfiltered data on its products, customers, and finances. People can easily find and collaborate with others in the organization that have relevant knowledge or similar interests, openly sharing ideas and the results of their work. This also requires team members to be open and transparent with one another; only then can the organization create an environment of psychological safety where all issues can be raised and discussed and where everyone has a voice.

Agile organizations seek to make continuous learning an ongoing, constant part of their DNA. Everyone can freely learn from their own and others’ successes and failures, and build on the new knowledge and capabilities they develop in their roles. This environment fosters ongoing learning and adjustments, which help deliverables evolve rapidly. People also spend dedicated time looking for ways to improve business processes and ways of working, which continuously improves business performance.

Agile organizations emphasize quick, efficient, and continuous decision making, preferring 70 percent probability now versus 100 percent certainty later. They have insight into the types of decisions they are making and who should be involved in those decisions.9 Rather than big bets that are few and far between, they continuously make small decisions as part of rapid cycles, quickly test these in practice, and adjust them as needed for the next iteration. This also means agile organizations do not seek consensus decisions; all team members provide input (in advance if they will be absent), the perspectives of team members with the deepest topical expertise are given greater weight, and other team members, including leaders, learn to “disagree and commit” to enable the team to move forward.

4. Dynamic people model that ignites passion

From:“To achieve desired outcomes, leaders need to control and direct work by constantly specifying tasks and steering the work of employees.”

To:“Effective leaders empower employees to take full ownership, confident they will drive the organization toward fulfilling its purpose and vision.”

An agile organizational culture puts people at the center, which engages and empowers everyone in the organization. They can then create value quickly, collaboratively, and effectively.

Organizations that have done this well have invested in leadership which empowers and develops its people, a strong community which supports and grows the culture, and the underlying people processes which foster the entrepreneurship and skill building needed for agility to occur.

Leadership in agile organizations serves the people in the organization, empowering and developing them. Rather than planners, directors, and controllers, they become visionaries, architects, and coaches that empower the people with the most relevant competencies so these can lead, collaborate, and deliver exceptional results. Such leaders are catalysts that motivate people to act in team-oriented ways, and to become involved in making the strategic and organizational decisions that will affect them and their work. We call this shared and servant leadership.

Agile organizations create a cohesive community with a common culture. Cultural norms are reinforced through positive peer behavior and influence in a high-trust environment, rather than through rules, processes, or hierarchy. This extends to recruitment. Zappos, the online shoe retailer acquired by Amazon changed its recruiting to support the selection of people that fit its culture—even paying employees $4,000 to leave during their onboarding if they did not fit.10

People processes help sustain the culture, including clear accountability paired with the autonomy and freedom to pursue opportunities, and the ongoing chance to have new experiences. Employees in agile organizations exhibit entrepreneurial drive, taking ownership of team goals, decisions, and performance. For example, people proactively identify and pursue opportunities to develop new initiatives, knowledge, and skills in their daily work. Agile organizations attract people who are motivated by intrinsic passion for their work and who aim for excellence.

In addition, talent development in an agile model is about building new capabilities through varied experiences. Agile organizations allow and expect role mobility, where employees move regularly (both horizontally and vertically) between roles and teams, based on their personal-development goals. An open talent marketplace supports this by providing information on available roles, tasks, and/or projects as well as people’s interests, capabilities, and development goals.

5. Next-generation enabling technology

Mind-set shift

From:“Technology is a supporting capability that delivers specific services, platforms, or tools to the rest of the organization as defined by priorities, resourcing, and budget.”

To:“Technology is seamlessly integrated and core to every aspect of the organization as a means to unlock value and enable quick reactions to business and stakeholder needs.”

For many organizations, such a radical rethinking of the organizational model requires a rethinking of the technologies underlying and enabling their products and processes, as well as the technology practices needed to support speed and flexibility.

Agile organizations will need to provide products and services that can meet changing customer and competitive conditions. Traditional products and services will likely need to be digitized or digitally-enabled. Operating processes will also have to continually and rapidly evolve, which will require evolving technology architecture, systems, and tools.

Organizations will need to begin by leveraging new, real-time communication and work-management tools. Implementing modular-based software architecture enables teams to effectively use technologies that other units have developed. This minimizes handovers and interdependencies that can slow down production cycles. Technology should progressively incorporate new technical innovations like containers, micro-service architectures, and cloud-based storage and services.

In order to design, build, implement, and support these new technologies, agile organizations integrate a range of next-generation technology development and delivery practices into the business. Business and technology employees form cross-functional teams, accountable for developing, testing, deploying, and maintaining new products and processes. They use hackathons, crowd sourcing, and virtual collaboration spaces to understand customer needs and develop possible solutions quickly. Extensive use of automated testing and deployment enables lean, seamless, and continuous software releases to the market (for example, every two weeks vs. every six months). Within IT, different disciplines work closely together (for example, IT development and operations teams collaborate on streamlined, handover-free DevOps practices).

Sidebar

McKinsey on agile transformations

By the year 2000, product developers were facing a challenge—products were being released so slowly that by the time they were production-ready they were already obsolete and customer needs had moved on. This all changed in 2001 when 17 software developers who called themselves “organizational anarchists” were looking for alternative approaches to the typical waterfall approach to software development. They proposed a new set of values, methodologies, and ways of working that then swept through the product-development and technology arenas over next 16 years. This became known as “agile software development” or “agile technology.”

In 2011, McKinsey’s research into organizational redesigns uncovered a very similar problem—57 percent of companies were redesigning every two years with an average length of a redesign being 18 months. In other words, companies were barely finishing one redesign before changes in the market or customers were requiring them to start another redesign—a similar “waterfall” problem in organization design. A new emergent organization form addresses this issue. It leverages both established and novel principles of how to organize work, deploy resources, make decisions, and manage performance with the goal of helping organizations quickly adapt to rapidly changing conditions. Compared with the traditional organizational model, this new approach—which we called an “agile organization” in a nod to its roots—is emerging as a fundamentally different and higher performing kind of organization, one designed for the complex, constantly evolving markets of the 21st century.

McKinsey defines “agile transformations” broadly. For us, the term “agile transformation” is a holistic change that creates value for the enterprise. It necessarily requires a change in the operating model and ways of working. Often technology and digitization are pieces of the journey toward completing an agile transformation. We take a holistic view of a company’s operating model across people, process, structure, strategy, and technology—looking for both the stable and dynamic elements that must be in place to create agility. Such transformations can be done across an entire enterprise or within just a single function, business unit or end-to-end process. They should take an industry-backed perspective to inform the agile design, looking for the latest trends around digital, technology, talent, and supply chain that are posed to make disruptive changes in the market. They should also tie organizational agility tightly to the agile delivery of projects so that organizations build the skills necessary to deliver work quickly as well as create the right organizational environment to make those teams successful.

To learn more about agile organizations, see other articles in the Agile Organization series, or to learn more about agile technology transformations or digital transformations, please see articles on McKinsey.com.

In summary, today’s environment is pressing organizations to become more agile; in response, a new organizational form is emerging that exhibits the five trademarks discussed above. In aggregate, these trademarks enable organizations to balance stability and dynamism and thrive in an era of unprecedented opportunity.

The next question is how to get there? In a rapidly changing commercial and social environment, some organizations are born agile, some achieve agility, and some have agility thrust upon them. To learn more about how to begin the journey towards an agile transformation, stay tuned for another paper in the dynamic Agile Organization series, “The journey to an agile organization.”

Proposed changes to federal regulations protecting the confidentiality of veterans’ medical records would make it easier for healthcare providers in the private sector to access patient data when they need it most – at the point of care.

The new rule proposed by Veterans Affairs (VA) Secretary David Shulkin, MD, allows VA providers to share individual health records with community providers without requiring a signed, physical note of consent from the patient before treatment.

Instead, health information exchange (HIE) providers would be responsible for confirming that a patient has agreed to allow the VA to share his or her medical data with a community provider. In lieu of a physical document signed by the patient, an electronic attestation could be used to request records from the VA.

“While an estimated three out of four veterans enrolled in VA’s health care system also seek medical care in the community, HIE community partners’ requests for their VA health records must frequently be denied because VA does not have a consent on file,” the VA explains in the Federal Register. “The primary obstacle is that veterans will often seek care in the community prior to having the opportunity to provide the consent form to VA and are then left without any means of getting the consent into VA’s physical possession promptly once they are at the community health care facility.”

These types of bureaucratic barriers have contributed to delays in care for veterans, which in turn can cause them to give up seeking treatment. A 2017 study published by the National Institutes of Health showed that 29 percent of veterans delayed seeking needed healthcare in 2010-2011, compared to only 17.2 percent of all Americans.

The proposed rule doesn’t eliminate the need for the VA to be able to access a signed consent from a veteran. It includes language requiring the HIE community provider make the consent form available to the VA within 10 business days by either storing the written form electronically or mailing the physical copy to the VA.

Alternately, the community provider can retain the patient’s written consent under a memorandum of understanding drafted and signed by VA and the provider, which would be required to follow VA record retention requirements.

The VA is accepting public comments on the proposed rule through March 20.

Revolutionary new cancer treatments won’t be available in many rural areas of the U.S.

Two new cancer treatments have shown miraculous cures, but if you happen to live in Arkansas or Montana, or a handful of other rural states—let alone outside the U.S.—you’ll have to travel hundreds of miles to get them. And it’s by no means certain that they’ll eventually be available everywhere.

These groundbreaking gene therapies, Kymriah and Yescarta, were approved last year in the U.S. Not only are they hugely expensive—Kymriah is $475,000 and Yescarta is $373,000 for a one-time treatment—but for now you can get them only in certain urban areas. We mapped those locations below. (Current Kymriah sites are red; current Yescarta sites are blue; sites where both therapies are available are green; and planned Kymriah sites are orange. Click on the tab in the top left corner to see a drop-down list of all sites.)

As you can see, some of the biggest gaps are in rural states, where cancer already kills more people than it does in cities. That’s a problem because both therapies are given as a last resort when traditional cancer drugs have failed. By the time patients get Kymriah or Yescarta, they’re often very sick, so traveling long distances is hard and could delay treatment.

To be fair, it’s early days and the companies that market the therapies, Novartis and Gilead, have plans to eventually add more sites. But in the short term, some far-flung cancer patients may be out of luck. And even in the long term, there are factors that could limit their access.

Called CAR-T cell therapies, Kymriah and Yescarta involve a highly specialized process. Doctors extract T cells—one of the immune system’s weapons against disease—from patients and genetically alter them, essentially supercharging them against cancer cells. They then infuse the modified immune cells back into the body.

Many patients have had remarkable recoveries, but they can also suffer toxic and sometimes deadly side effects. Aaron Levine at the Georgia Tech School of Public Policy, who has studied the ethics of CAR-T cell therapies, says these side effects will likely be the biggest obstacle to making the therapies more widely available, “as only a small number of physicians and medical teams are prepared to address them.”

If a lot of patients suffer these side effects or die in the initial rollout of Kymriah and Yescarta, that could slow the addition of more sites.

Another factor is that right now, CAR-T therapies primarily treat rare cancers. Currently, Kymriah treats a type of childhood cancer called acute lymphoblastic leukemia, and Novartis thinks only about 600 patients a year will be eligible for it. Yescarta treats large B-cell lymphoma in adults, and Gilead estimates it could help around 7,500 people a year.

“The reality is, the market isn’t that big, so it doesn’t make sense to train everyone to do it,” Levine says. More CAR-T therapies are in development, but so far it’s unclear how well they will work for more common cancers.

There’s also the question of whether insurance will pay for these staggeringly expensive treatments. Only a handful of patients have been treated with Yescarta; hundreds more are waiting because of payment delays. If some insurers decide they won’t cover the cost, that could foil companies’ plans to expand treatment sites. “We need to watch out for a situation in which these therapies only become available to urban elites who live near academic medical centers,” Levine says.

Still, Levine is hopeful. “It’s still early enough for things to change and evolve,” he says.

Peter Emanuel, director of the Winthrop P. Rockefeller Cancer Institute in Little Rock, Arkansas, which is 350 miles from the nearest treatment site for Kymriah or Yescarta, isn’t worried about what the map looks like right now.

He says administering these therapies and managing potential side effects requires a large and specialized team of hospital workers, so it’s probably best—at least for now—that Kymriah and Yescarta are available only at hospitals with more resources.

The real test, says Emanuel, will be if and when new CAR-T therapies are approved for more common cancers. “At that point, I think it’s justified to expand the number of centers, and hopefully that expansion includes smaller cities and more rural states,” he says.

I am MIT Technology Review’s associate editor for biomedicine. I report from Washington, D.C., where I look for stories about how new technology is making us healthier and our medicine better. I am particularly interested in how these advances… More

A lack of oversight of the national repository of Medicaid data caused an estimated $36.7 billion in payment errors in 2017, according to a new Government Accountability Office report. That’s up from an estimated $14.4 billion in improper payments in Fiscal Year 2013.

Transformed Medicaid Statistical Information System (T-MSIS) is CMS’ core effort to improve Medicaid data by increasing the scope of data and quality of state-reported data.

About 49 states began reporting that data to the national repository in November, up from just 18 states the year prior. The data help federal administrators to identify potential fraud and improve the efficiency of the program, but data aren’t sufficient enough for an effective oversight of the program.

“CMS has taken an important step toward developing a reliable national repository for Medicaid data,” the GAO report authors wrote. “However, data challenges have hindered states’ and CMS’s use of the T-MSIS data for oversight.”

For example, the reported data was incomplete for all of the selected six states reporting data in August 2017 as the states said that “certain unreported elements were contingent on federal or state actions and others weren’t applicable to the state’s Medicaid program.”

Further, states failed to mention in documentation whether those elements would be reported in the future, or when they would report complete data.

Six of eight selected states actually expressed concerns about how T-MSIS data could be compared across states. While all states reported interest in information sharing across states, CMS hasn’t compiled or shared information about states’ data limitation – an act that would help states improve accuracy when comparing data between states.

Although CMS has taken those first steps to using T-MSIS data, it doesn’t yet have a plan or even a timeframe to use this data for oversight.

“As a result, important CMS goals for T-MSIS, such as reducing states’ reporting burden and enhancing program integrity activities, are not being fully realized,” the report authors wrote.

GAO officials recommend CMS improve the completeness and comparability of T-MSIS data to accelerate the program, in addition to articulating a specific oversight plan.

The U.S. Department of Health and Human Services agreed with those recommendations and said it would continue to work on obtaining complete T-MSIS data from states. Further, the agency said it will take steps to address data sharing limitations within states, along with helping states collaborate.

“Strong Medicaid data can help the federal government and the states move toward better health outcomes and improve program integrity, performance, and financial management,” HHS officials told GAO, according to the report.

A new study says yes, but only if the prices are easy to understand.

For any medical procedure, from a minor checkup to major surgery, there can be significant uncertainty about a key component: the price.

Indeed, for healthcare, unlike most products and services, we typically don’t know the exact price we will have to pay until after we receive a bill.

But what if there was greater transparency about the exact out-of-pocket price we would pay for a given procedure and how much that price varies across hospitals or providers? Would that change the providers we choose?

The answer is of interest to policymakers, whose goal is to encourage consumers to be more price-sensitive, saving money for themselves and reducing spending in the system overall.

“There’s a decades-long debate in healthcare about whether you can actually get people to shop on price,” says Elena Prager, an assistant professor of strategy at Kellogg. “We tend to view medical services as a different kind of product where price may not matter much.”

She finds that, indeed, price shopping in healthcare is possible—but it involves presenting consumers with price information in a much more simplified way than insurers typically do.

Do Healthcare Consumers Price Shop?

Think about your own healthcare bills for a moment. Do the words “simple” or “clear” immediately come to mind? Likely not.

“Even when people get an explanation of benefits from insurers, pricing can still be pretty opaque,” Prager says.

This is a problem because policymakers and insurers are trying to motivate consumers to understand the cost–benefit trade-offs of their healthcare decisions, as well as the value they are getting for the money spent—both out of their own pockets and from the balance sheets of insurers. But in most cases people lack the information to make informed decisions.

“On one hand, we’re asking for people to pay for more and more of their care” due to, for example, increasing deductibles and the rising cost of healthcare, Prager says. “But on the other, we’re not giving them the right tools to make good decisions about those large monetary amounts. So it’s important to understand whether it’s even possible to design effective healthcare price-information systems.”

Much of the earlier research on how to encourage price shopping in healthcare often focused on high-deductible health insurance plans.

“Even for care that serious, people are willing to trade off hospital prestige or distance to their house in order to save money.”

The logic was simple: if consumers have to cover a larger amount of their care—based on deductibles that could run well into the thousands of dollars before insurance coverage kicks in—they would be more price-sensitive when choosing services or providers.

But findings showed people had little sensitivity to price even when using these high-deductible plans.

“That’s because high-deductible insurance only solves one piece of the price-sensitivity problem by giving people more skin in the game,” Prager says. “These plans still don’t give enrollees sufficient price information. So people still have to figure out what the actual price they pay will be.”

That may mean finding and adding up prices from multiple medical areas and providers, even when considering only a single procedure. There may be different bills from the hospital and from the doctors working at the hospital, and from anesthesiology, surgery, the hospital pharmacy, and more. The information is often difficult to find, if not impossible.

The Simpler, the Better

Prager’s research used unusually transparent data from an insurance system in Massachusetts.

The study examined private health insurance claims from multiple insurers from 2009 to 2012. But importantly for the research, all these insurers gave consumers very clear information on cost.

Additionally, in many of the health plans, these insurers group hospitals into “tiers” based on price. A hospital’s tier determines consumers’ out-of-pocket payment for a given procedure at that hospital.

“For any procedure, such as a knee replacement,” Prager said, “people on these plans could look at insurer-provided documentation and on a single page see the price menu for all hospitals in the state, by tier—first, second, or third—and exactly what their out-of-pocket price will be. And it’s a set dollar amount, not 10 percent or 20 percent or the total cost. Just $300 or $700 or whatever, end of story.”

In some health plans, the difference in cost from one tier to another was substantial; for others, there was little to no price differential; and others simply had the same copay for all hospitals without using tiers. This allowed Prager to compare how consumers responded to the option to price shop in a very transparent system.

The data studied included the insurance plans of over 200,000 enrollees and dependents, the out-of-pocket prices they saw while making treatment decisions, and how much they and the insurers paid for procedures. The researchers focused on inpatient services—such as major surgery or delivering a baby.

The Power of Presentation

Prager found that people in the study did indeed opt for lower-priced medical services when presented with clear, simple price information.

For example, she modeled how the same patient would behave when enrolled in different types of plans—those with large cost differences between hospitals and those with none. She found that total spending per hospital stay fell by 1.3 percent when consumers were presented with cost differences.

Prager predicts that providers in the lowest-priced tier would gain about 53 percent in patient volume over three years due to price shopping.

“People weren’t sure price shopping in healthcare was even possible,” she says. “These findings show that it is.”

Indeed, people in the study were making price-based decisions about inpatient treatment, the type of higher-stakes interventions that required overnight stays.

“Even for care that serious,” Prager says, “people are willing to trade off hospital prestige or distance to their house in order to save money. So we might expect to see even greater price-shopping behavior for less serious care.”

Still, it takes an extremely simple approach to presenting price information to help people make healthcare decisions. “We haven’t been good at providing that in the US system,” Prager says.

Greater availability of simple healthcare price information would be good news for consumers and insurers alike. Patients save out-of-pocket costs by choosing lower-priced services, and insurers can save even more.

“Hospitals can differ by thousands of dollars for a given procedure,” Prager says, “and insurer savings can be many multiples of what consumers save when choosing a lower-priced option. Though not a guarantee, that might lower insurance premiums in the long run.”

What About Providers?

What are the implications of Prager’s findings for hospitals, physicians, and other providers?

“The level of enthusiasm providers have about these results will differ by where they are currently in the price distribution,” Prager says. She breaks down providers into three broad categories similar to the tiers insurers use.

Low-priced providers should be “thrilled” about price shopping, she suggests, because they can keep prices where they are and enjoy more volume because price-sensitive consumers will pick them when presented with clear price information.

Medium-priced providers are more likely to lose patient volume to lower-priced competitors because consumers will choose price over reputation or other factors such as proximity to home. “That will siphon off some volume from providers priced in the middle,” Prager says, “but they can try to negotiate lower rates with insurers in subsequent years to get into a lower tier.”

High-priced, highly desirable providers “won’t really care about price shopping,” Prager says, “because patients are willing to pay whatever it takes to get their care there.” She points to the Harvard-affiliated academic medical centers in the study as examples. These providers have such strong reputations that fewer consumers are willing to switch away from them, even if the price difference is stark. This means less savings for consumers and, especially, insurers.

The good news for patients and insurers is that the number of tiered insurance networks that have easier access to simple price information has grown in the last decade or so.

Over 10 percent of people enrolled in the Affordable Care Act exchange plans are in plans that are structured this way, Prager says, and a growing number of large employer-sponsored plans are, too. At the same time, many other insurers remain overly reliant on complex pricing tools, typically online, through which enrollees can search for providers and prices by procedure and zip code—but prices are still presented in a complicated way.

“Those complex tools are the darling of the industry,” Prager says, “but they don’t always work as well as hoped because they leave a lot of uncertainty about pricing. Instead, providing a simple menu of tiered-network options and prices has serious advantages that should be even more highlighted going forward.”

This chart collection takes a look at how spending on healthcare in the United States compares to other OECD countries that are similarly large and wealthy (based on GDP and GDP per capita). The analysis looks at 2015 health data from the OECD Health Statistics database. These charts are based on data from the OECD, allowing for international comparisons; however, some values from OECD are reported as provisional or estimated and may not exactly match U.S. data reported in the National Health Expenditure Accounts.

As would be expected, wealthy countries like the U.S., tend to spend more per person on health care and related expenses than lower income countries. However, even as a high income country, the U.S. spends more per person on health than comparable countries. Health spending per person in the U.S. was $9,451 in 2015 – 22% higher than Luxembourg, the next highest per capita spender.